Barriers in the Sky

This paper investigates the economic impacts of inefficient transport network design, using China's restrictive airspace as a case study. China's commercial airlines are limited to using 20% of its airspace, giving rise to an average route curvature of 17%—compared to 5% in the US and Europe. Using route curvature as a direct measure of inefficiency and an IV estimation strategy, we find that greater route curvature increases airfares and delays while reducing flight frequency and aeroconnected city pairs. These inefficiencies cascade into broader economic costs, hampering cross-city activities including corporate investment, patent collaboration, personal travel, and migration.